Manager Retention and Post-Bankruptcy Performance: Evidence from South Korea

This study uses a sample of bankrupt firms in South Korea to reexamine the effect of manager retention on a firm’s post-bankruptcy performance, with a particular focus on the attributes of retained managers. Prior studies did not clarify whether a lack of ability of the retained manager or their self-serving behavior contributes more to a firm’s poor post-bankruptcy performance. Our results show that firms that retain their pre-bankruptcy managers are more likely to experience poor post-bankruptcy firm performance than those that replace incumbent managers, possibly because of the lack of ability of the retained managers rather than their self-serving behavior.